Scenario planning, an approach that encourages broad strategic thinking rather than detailed tactical solutions, is one way of handling the ultimate 'unpredictaibility' of things. The process of reviewing wildly divergent circumstances enables an executive team (sometimes) to see the deepest flaws in corporate positioning or assumption. The result of a good scenario planning process is the realization that this process or that product needs to be shored up.

We have a regular correspondent who believes, forcefully, that there will be no labor shortage whatsoever. He imagines the emergence of an increasingly 'sustainable' economy whose focus is on stability rather than growth. His well taken point is that the labor shortage is really a consequence of continued, though moderate, economic growth. One clear resolution of the demographic trend would be a relative end to our cultural fascination with growth. 

It could easily be argued that this is what has happened in Japan. The past decade of economic stagnation can be seen as a loss of confidence in Japan's ability to grow by the International investment community. Although this is certainly not an awakening to the virtues of 'sustainability', Japan's inability to generate productive economic results has its roots in a similar demographic crisis coupled with a massive shortfall of investment capital.

So, there are at least two structural scenarios, one in which investment capital focuses on the resolution of the trend and one in which the capital flees to more populous and predictable settings (India and China). In one version, competition is fierce and financed. In the other, sustained thriftiness is the order of the day.

In 2003, the shortages happened in the agricultural and transportation sectors. One of the first symptoms of the shortage has been big bonuses for corporate managers. The easiest way to understand a shortage that is smaller than existing attrition rates is that it has been broadly understood as managerial effectiveness in cost reduction. "We can't get the people." translates far too easily into "Look at the money we saved, look at our increased profitability." 

Given the financial pressures of the last couple of years, you could hardly blame anyone for taking the first signs of catastrophe as a pleasant gift from the gods.

Like many deep and powerful trends, the labor shortage will manifest itself in a variety of ways. We'd argue loud and long that attention should be focused on the medium term horizon line. Building complex supplies of relationships with potential candidates is a critical but completely misunderstood line of action in this regard. 

But, the opportunities and manifestations will vary broadly. More than detailed plans, it's time for a deep strategic rethink. Careful reflection on the possible effects of the early stages of the unfolding demographic change will pay off in deeper preparedness.